Correlation Between JYP Entertainment and Asia Economy

Can any of the company-specific risk be diversified away by investing in both JYP Entertainment and Asia Economy at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining JYP Entertainment and Asia Economy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between JYP Entertainment and Asia Economy Daily, you can compare the effects of market volatilities on JYP Entertainment and Asia Economy and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in JYP Entertainment with a short position of Asia Economy. Check out your portfolio center. Please also check ongoing floating volatility patterns of JYP Entertainment and Asia Economy.

Diversification Opportunities for JYP Entertainment and Asia Economy

0.65

Correlation Coefficient

JYP Entertainment  Asia Economy

Poor diversification

The 3 months correlation between JYP and Asia is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding JYP Entertainment and Asia Economy Daily in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Economy Daily and JYP Entertainment is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on JYP Entertainment are associated (or correlated) with Asia Economy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Economy Daily has no effect on the direction of JYP Entertainment i.e., JYP Entertainment and Asia Economy go up and down completely randomly.

Pair Corralation between JYP Entertainment and Asia Economy

Assuming the 90 days trading horizon JYP Entertainment is expected to generate 1.41 times more return on investment than Asia Economy. However, JYP Entertainment is 1.41 times more volatile than Asia Economy Daily. It trades about 0.29 of its potential returns per unit of risk. Asia Economy Daily is currently generating about 0.14 per unit of risk. If you would invest  4,470,000  in JYP Entertainment on September 17, 2024 and sell it today you would earn a total of  2,960,000  from holding JYP Entertainment or generate 66.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

JYP Entertainment  vs.  Asia Economy Daily

JYP Entertainment

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in JYP Entertainment are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, JYP Entertainment sustained solid returns over the last few months and may actually be approaching a breakup point.

Asia Economy Daily

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Asia Economy Daily are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Asia Economy sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JYP Entertainment and Asia Economy

The main advantage of trading using opposite JYP Entertainment and Asia Economy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JYP Entertainment position performs unexpectedly, Asia Economy can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Asia Economy will offset losses from the drop in Asia Economy's long position.

The idea behind JYP Entertainment and Asia Economy Daily pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.